Please may I get the answers to the attached 5 questions.

Module 4.A Chapter 11 Question 1: 11.19 MEDIUM Your audit firm, Styles & Associates, is the auditor of Brook Ltd (Brook) for the year ended 30 June 2015. Brook is a large and diversified entity. The directors' declaration and auditor's report is to be signed on 31 July 2015, and the financial report and auditor's report mailed to shareholders on 4 August 2015. Consider each of the following independent and material situations. (i) On 25 June 2015, Brook entered into a contract to purchase iron ore from Explorer Minerals Ltd. The iron ore was shipped and title passed on 26 June 2015. At the time of entering into the contract, the mineral content of the ore was estimated to be 75 per cent, and the liability calculated accordingly. However, when the shipment was received on 15 July 2015, the mineral content was found to be 85 per cent, resulting in the liability having been understated. (ii) On 22 July 2015, Brook received notice that one of its customers was taking legal action in relation to a disputed warranty claim. The customer purchased the goods on 31 May 2015, and first informed Brook of problems with the goods on 28 June 2015. (iii) During the financial year, Brook's management wrote down an investment in a synthetic fibre project based on its belief that regulatory approval that was essential to its marketability was unlikely to occur. However, on 28 July 2015, the regulatory approval was given. (iv) On 30 September 2015, Brook settled a lawsuit with Rolling Hills Ltd for twice the liability accrued in the financial report. REQUIRED (a) For each of the events described above, explain the appropriate action, if any, that Brook should undertake. (b) What additional information would you, as the auditor, obtain in relation to each of the events described above? LO 11.2 Question2: 11.24 MEDIUM Munro & Associates (Munro) are the auditors of Magnify Ltd (Magnify) for the year ended 30 June 2015. Magnify is a listed entity that specialises in the manufacture and sale of scientific equipment throughout Australia and is subject to an income tax rate of 30 per cent. The audit methodology used by Munro includes the following guidance for the assessment of unadjusted audit differences: 10% = material. It is now 31 July 2015 and the fieldwork has been completed for the 2015 audit and the auditor's report is due to be signed on 16 August 2015. The following key financial information has been extracted from Magnify's final trial balance: $ Cash 960 000 Accounts receivable 3 100 000 Inventory 2 500 000 Current assets 6 560 000 Equipment 4 100 000 Total assets 10 660 000 Accounts payable 1 700 000 Accruals 500 000 Current liabilities 2 200 000 Non-current liabilities 7 000 000 Total liabilities 9 200 000 Owners' equity 1 460 000 Liabilities and equity 10 660 000 Profit before income tax 975 000 A review of the audit working papers has revealed the following unadjusted items. (No other matters were identified as a result of the audit work.) (i) Problems with inappropriate cut-off of expenses at year end have resulted in an invoice for security services for June of $35 000 not being recognised. (ii) Due to technology obsolescence, the equipment balance is overstated by $45 000. (iii) The testing of overdue debtors balances uncovered: an amount of $41 000 was received prior to year end, but not processed an amount of $25 000 that was not recoverable and had not been written off. REQUIRED In accordance with Munro's audit methodology, determine whether the financial report is materially misstated as a result of the above unadjusted items, both individually and in aggregate. Show your workings. LO 11.4 Source: This question was adapted from the Chartered Accountants Program of The Institute of Chartered Accountants in Australia 2012 (3) Audit & Assurance Module. Question 3: Appropriateness of going concern basis 11.26 MEDIUM You are the auditor of Innovative Creations Pty Ltd (Innovative Creations), a wholly owned subsidiary of Global Inc. (Global), a company listed on the New York Stock Exchange. Innovative Creations was established in 2012 to provide Global with access to the Australian market. Since its establishment, Innovative Creations has found trading conditions difficult. The audit evidence obtained suggests that unless Innovative Creations receives a significant cash flow injection, or trading conditions improve dramatically, it will be bankrupt within six months. You have approached the CEO of Innovative Creations with your concerns and she has indicated that there is nothing for you to worry about, as Global has guaranteed financial support of the company for as long as it takes to establish a market presence in Australia. REQUIRED (a) How would the parent company's support affect your assessment of the going concern status of Innovative Creations? (b) Describe any further evidence you will require to assess the appropriateness of the going concern assumption at Innovative Creations. (c) Assuming that Innovative Creations is considered a going concern, explain the effect that the guaranteed financial support by Global will have on Innovative Creations' financial report. LO 11.5 Chapter 12 Solutions Question 4: 12.21 MEDIUM It is now 11 August 2015 and you are auditing the financial report of Mixed Emotions Ltd (MEL) for the year ended 30 June 2015. The directors' report, directors' declaration and auditor's opinion have not yet been signed. In January 2015, the Australian Taxation Office (ATO) commenced an audit of MEL's income tax returns for the three income tax years 2012 to 2014. MEL has, to the best of its knowledge and based on its high standards of integrity, never engaged in tax avoidance practices. On 20 June 2015, after the completion of the tax audit, the ATO sent written advice to MEL that, in their view, MEL had incorrectly calculated the effective life of its depreciable fixed assets and, as a consequence, had claimed excessive depreciation expense in the three tax years 2012 to 2014. The written advice stated that amended tax assessments for the relevant years will be issued in due course. On 15 July 2015, the ATO issued amended assessments for the relevant tax years which were due for payment on 15 August 2015. MEL has sought advice from an independent tax expert and has been advised to appeal the revised tax assessments, despite it being very unlikely that the appeal would be successful. The additional income tax payable resulting from the revised tax assessments would be material to the report. REQUIRED Identify the appropriate auditor's opinion for MEL for the year ended 30 June 2015 if management: (a) refuses to adequately disclose the facts in a note to the financial report, or to adjust the financial report to ensure it is prepared, in all material respects, in accordance with the applicable financial reporting framework. Justify your answer. (b) discloses the amended assessment in a note to the financial report. Justify your answer. LO 12.4 Source: This question was adapted from the Chartered Accountants Program of The Institute of Chartered Accountants in Australia 2011 (2) Audit & Assurance Module. Question 5: 12.26 MEDIUM You are undertaking the 2015 audit of Country Lane Ltd (Country Lane), a manufacturer and exporter of building products. Consistent with previous years, Country Lane has accounted for inventory on a 'last in, first out' (LIFO) basis. Country Lane uses a 'just in time' inventory management system and, therefore, in previous years the effect of this departure from Australian accounting standards was not material. In the current year, however, the company has a large stockpile of inventory at year end due to an unexpected cancellation of a major order en route to its destination. In order to reduce freight costs, Country Lane temporarily stored the goods in Indonesia, hoping for an order from another South-East Asian customer. Unfortunately you were not told of this problem until after balance date and did not conduct a stocktake of the inventory. You have also been told that some of the inventory has since been shipped to a number of different customers to fill outstanding orders. The available audit procedures have been unable to validate the existence of this inventory. The relevant inventory is currently recorded at $1250000. Audit procedures have indicated that, had inventory been accounted for on a 'first in first out' (FIFO) basis, it would have been recorded at $1750000. Materiality for the audit has been set at $500000. REQUIRED Explain the basis of any modifications required to the auditor's report. LO 12.5 Question 6: Comparative information and other information in the annual report 12.27 MEDIUM You are the auditor of International Energy Generation Ltd (IEGL) for the year ended 30 June 2015. You have completed your audit and are finalising your auditor's report when you discover that the company has incorrectly stated in the chairman's review of operations that it has complied with environmental guidelines regarding its carbon emissions. Noncompliance with these guidelines was investigated during the audit and it was noted (in a conversation with a junior manager) that IEGL's emissions were significantly above compliance standards. There is currently no financial implication for noncompliance, so no further action was taken. You believe, however, that the statement in the annual report will affect the perception of readers of the annual report regarding the company's entitlement to future environmental incentives. This information is likely to lead to a material adjustment of IEGL's share price. REQUIRED (a) What action would you take in regard to the above situation? (b) What action would you take if the reports had already been signed and the annual report issued? LO 12.6 Source: This question was adapted from the Chartered Accountants Program of The Institute of Chartered Accountants in Australia 2009 (2) Audit & Assurance Module. QUESTION 7: CONSULTING QUESTIONS Completing the audit/Audit opinions - Question You are the engagement partner for the financial report audit of Brett's Fashion Ltd (BFL), a new fashion clothing company, for the year ended 30 June 2016. Upon completing the audit and days from issuing of the audit report, the following independent and material situations have come to your attention. You are scheduled to issue the audit report on 31 August 2017. 1. When auditing the year end accounts, a junior auditor discovered that obsolete inventory amounting to $100,000 has not been written off. The adjustment is less than 5% of profit and not material, but would have caused BFL to breach its current ratio requirement under the loan covenant. 2. You are given the report of expert actuary hired by the client to assist in corroborating BFL's complex superannuation calculations concerning accrued liabilities that account for 25% of BFL's total liabilities. The actuary's findings are materially the same as BFL's calculations, but you are unconvinced that the actuary's findings are accurate. 3. You found during the year end procedures that BFL was experiencing cash flow issues that could render them insolvent if they were unable to re-finance their long term debt. 4. On 15 August 2017, a major client of BFL declared bankruptcy due to the unexpected loss of a legal dispute settled on the 10 August. The client had an outstanding and material accounts receivable balance owing to BFL. 5. At its 28 August 2017 meeting, BFL's board of directors voted to double the advertising budget for the coming year and authorised a change of advertising practises. Questions: a) For each of the independent situations above, discuss the appropriate course of action you recommend management in BFL take in order for an unqualified opinion to be issued. Provide reasons for the action and any preliminary actions that you as the audit partner would make prior to the recommendation. b) If management in BFL refuse to take on your recommendations in part a), what opinion would you issue in each situation? Provide reasons and supporting references.to ASA standards